Embattled surfwear chain Billabong saw half its value wiped out after the company announced an end to long-running takeover talks.

The Australian group said two private equity firms, Altamont Capital and Sycamore, had abandoned plans for a full takeover and were now looking at a deal designed to help pay back its debt.

Billabong chairman Ian Pollard said: "The refinancing is intended to provide the company with a comprehensive solution and an appropriate capital structure, allowing it to continue its reform agenda. It's our intention to conclude these discussions as soon as possible while aggressively reducing costs across all of our global operations."

Billabong has been buffeted by a strong Australian dollar, which has dented overseas profits, while debts used to fund its international expansion have weighed on the company. Core Billabong brands, which include its namesake and Von Zipper, also appear to have lost touch with the group's core youth market.

The company – which has been dealing with takeover approaches for more than a year – has pledged to cull brands and close underperforming stores.

The shares took a nosedive after they resumed trading on Tuesday, plunging 41% to A$0.26 – leaving the company worth just A$130m (£86m). Sycamore – which had teamed up with the former head of Billabong's US business – offered A$0.60 cents a share, or A$287m, for the company in April. But reports suggest the firm walked away after its banks asked for more information on the quality of Billabong's earnings.

On Tuesday, Billabong ripped up its full-year guidance for the fourth time since December 2012, saying earnings were likely to be 13% lower than forecasts it made in February. The company now expects full-year pre-tax profits before exceptional items of between $67m and $74m.

Billabong said it was still looking to sell 70-strong Canadian chain West 49, which it bought just three years ago for $91m, as part of an ill-fated push into the country. Reports suggest parties other than Sycamore and Altamont are also interested in the business.

The proceeds of the refinancing and asset sales would be used to repay Billabong's $279m debt pile, but analysts remained unconvinced. Jordan Rogers of Commonwealth Bank of Australia said: "Billabong's balance sheet is again in a fragile position. We don't view the private equity firms as reliable debt providers."